Don't Wait to Set Up Your Accounting System
Many entrepreneurs with a good idea and a growing business neglect the day-to-day running and control of finances through lack of time and interest, lack of the relevant skills, or because it just seems more important to focus on business development. The trouble is they can end up with serious financial liabilities – problems that could easily have been avoided if they had had the right knowledge and proper financial reporting in place from the start.
Many new start-ups also fail to fulfil their real potential through poor financial planning and expertise. In every success story, the business leaders have at an early stage recognised the importance of financial control and legal compliance. In most disasters, business leaders have treated these as an unnecessary expense and viewed external consultants as a surrender of control rather than as a means of gaining it.
Research at Stanford University in 2005 studied companies in a variety of technical and non-technical industries, each less than 10 years old. They found young companies begin with few management systems, and typically start to put them in place after a year or so. Organisations that acted quickly to put in mechanisms such as operation and cash budgets, and financial monitoring systems (tools that measure profitability, customer acquisition costs, variance from actual budget and so on) had measurably higher growth rates in terms of revenue and head count. They also had greater and more rapid increases in valuation at successive rounds of venture capital funding.
So clearly 'management by personality' only works up to a certain point. After that, you need to put systems in place, and get help if you need it. Business leaders who are provided with accurate and reliable data they can use for their managerial decision making, then have the freedom to focus on developing and realising the full potential of their business.